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Strategic asset allocation for a country: the Norwegian case

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  • Trond Døskeland

Abstract

This paper develops a simple strategic asset allocation model for a country with non-tradable assets and liabilities. Contemporaneous correlation does not capture the long-term relationship between the non-tradable items and the financial assets. I apply cointegration and duration matching to better identify the long-term relationship. The model is applied to the case of Norway. Simulations suggest that Norway should implement a strategy which entails a higher proportion (than today’s strategy) invested in stocks. Although the new strategy is superior in several criteria and as Norway reforms its social security system, there is still considerable risk that Norway will fail to meet its liabilities. Copyright Swiss Society for Financial Market Research 2007

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  • Trond Døskeland, 2007. "Strategic asset allocation for a country: the Norwegian case," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 21(2), pages 167-201, June.
    • Handle: RePEc:kap:fmktpm:v:21:y:2007:i:2:p:167-201
    DOI: 10.1007/s11408-007-0044-8
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    References listed on IDEAS

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    Cited by:

    1. Alfonso A. Irarrazabal & Lin Ma & Juan Carlos Parra-Alvarez, 2023. "Optimal asset allocation for commodity sovereign wealth funds," Quantitative Finance, Taylor & Francis Journals, vol. 23(3), pages 471-495, March.

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    More about this item

    Keywords

    Strategic asset allocation; Social security system; Public pensions; G11; H55;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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